Public Bill Committee

[Mr. Christopher Chope in the Chair]

Schedule 4

Changes to the calculation of maintenance

Amendment moved [this day]: No. 65, in schedule 4, page 63, leave out lines 23 to 27 and insert—
‘12% where the non-resident parent has one qualifying child; 16% where the non-resident parent has two qualifying children; 19% where the non-resident parent has three or more qualifying children.’.—[Paul Rowen.]

Paul Rowen: The Bill states that the amount of gross weekly income that will be deducted from non-resident parents is 12 per cent. if the non-resident parent has one qualifying child, 16 per cent. if they have two qualifying children and 19 per cent. if they have three or more qualifying children. If they earn more than £800 a week, however, the amounts that they would be expected to pay above the £800 threshold are reduced to 9 per cent. for one qualifying child, 16 per cent. for two children—

James Plaskitt: It is 12 per cent.

Paul Rowen: Sorry, 12 per cent. for two, and 16 per cent.—

James Plaskitt: It is 15 per cent.

Paul Rowen: Yes, and 15 per cent. for three; I thank the Minister for that. We tabled the amendment because we would like him to explain why that reduction is necessary above the £800 threshold. We do not see why the wealth of a high-earning, non-resident parent cannot be shared with his children. In proportional terms, the relevant amounts are small to the non-resident parent, but could make a considerable difference to the welfare of the child.
The Bill is largely about creating a more equitable framework, but the reduced rate for higher earners is likely to be a bone of contention between the parent with care and the non-resident parent, particularly if the parent with care has a considerably lower income than the non-resident parent. I know from personal experience that it is a bone of contention when a mother is struggling and sees that the non-resident parent is quite wealthy but is not sharing that wealth with their children. Will the Minister explain how the figures for the £800 threshold and the reduced percentages were chosen? The rationale behind them certainly is not clear to us.
What will happen if there is a change in the non-resident parent’s circumstances halfway through the year and he starts to earn considerably more? Will there be a reassessment? We are talking about issues of principle, fairness and equity.

Stephen Hesford: Will the hon. Gentleman give us cash figures for the changes that he proposes? What difference would they make?

Paul Rowen: The amendment proposes that there should not be a taper, so the percentage figures that are quoted for the first £800—12 per cent. for the first child, 16 per cent. for two and 19 per cent. for three—would be a flat rate. We do not see why wealthier parents should not share that wealth with their children, and we want to know why the £800 threshold and reduced percentages have been chosen. As far as we are aware, there is no rationale behind them.

Andrew Selous: I am indebted to the hon. Member for Rochdale for tabling the amendment. There has been a change of Government philosophy on this matter. It used always to be the case that, however rich non-resident parents were, their children would share in their increased income going forward. I remember that some Labour Members strongly defended that principle when I served with them on the Select Committee on Work and Pensions in the previous Parliament.
When the hon. Gentleman was speaking, I looked at page 74 of the explanatory notes to see whether was some explanation for the Government’s change of heart in relation to different treatment of the two groups in terms of the percentages that apply according to their income. I did not find much comfort. The point is an important one philosophically and I shall listen to the Minister with interest to see whether there is a valid justification for what he has done. The question has been well put.

James Plaskitt: I hope that I can satisfy the hon. Member for Rochdale. Let me begin by restating our commitment to ensure that all non-resident parents meet their financial responsibilities to their children. The Bill changes the basic rate that applies to all gross weekly income up to £800 a week, so that, as I think he now knows, the rate will be 12 per cent. for one qualifying child, 16 per cent. for two and 19 per cent. for three or more. As he said, it introduces new rates for those whose income is from £800 to £3,000 a week, at which point there is a cap. He now knows that those rates are 9, 12 and 15 per cent. respectively. The rates were chosen with the aim of preventing a substantial change in the cash liability for non-resident parents who move on to the new calculation rules. That is the straightforward answer to his question.
The £800 threshold corresponds to the amount of weekly income at which the 40 per cent. marginal income tax rate starts to apply. There is therefore a greater difference between gross and net income at and beyond those levels—a difference that we must take into account to ensure fairness in the proposed scheme. Without the second tier of rates, a non-resident parent with gross weekly earnings of £2,000 would end up paying £320 a week for two children instead of £282 under the current scheme. My hon. Friend the Member for Wirral, West asked what would be the cash impact of the proposal in the amendment. One way of putting it would be to say that, if the amendment were carried, the increase from current maintenance assessments for non-resident parents whose income takes them into the 40 per cent. band would be £64 a week for one child and £88 a week for two or more children.
The purpose of the two percentage tiers and the £800 threshold, therefore, is to match the new calculations as closely as possible in cash terms with the current assessments, thereby smoothing the transition. No new dispensation and no favours are being introduced for people on higher incomes. Instead, a level playing is being retained in relation to the current maintenance. That has to be done, because of the move from net to gross figures for calculation purposes.

Tim Boswell: I have two quick questions that follow on from the Minister’s very clear explanation of what is going on. The first is whether he could give the Committee any measure of the distribution of winners and losers under his formula. What are the limits at which somebody to whom the current formula is applied and who transfers to the new formula will or will not be significantly affected, as far as the number or percentage change in the assessment are concerned?
The second question is bound to be in our minds after the Chancellor’s announcement of his pre-Budget report today. Tax rates can, of course, change. Has the Minister made any provision—I do not detect one—for scope to alter the percentages if material circumstances alter? He might say that that is a done deal now—that we are on a gross rate and that so it will be for the future. However, is not such a power at least worth consideration?

James Plaskitt: I thank the hon. Gentleman for those two points. He asked first about a table of winners and losers. As far as I can recall, we published indicative figures on that. I do not have them in front of me, but the cash alteration on the illustrations that we have given is marginal in all cases. There are some slight “ups” and some slight “downs”, which is inevitable if a percentage basis is used.
The hon. Gentleman’s second question was why the percentage figures are expressly in the Bill and what happens if tax rates change. It is not so much a change in marginal tax rates that would have an impact; it is the threshold between the two. There is provision whereby if that were to change—for example, if a Chancellor were substantially to alter the point at which 40 per cent. marginal rates became applicable— regulations could be made to change the threshold point in line with any alteration that had been made in the Budget in respect of the 40 per cent. band. That would keep it consistent and the facility would be there to make the necessary change.
At the same time as introducing these new rates of calculation, we also propose to increase the maximum weekly outcome to be taken into account from £2,000 to £3,000, ensuring that higher earning non-resident parents do not unfairly benefit from the shift to calculations based on gross income from net. We want to ensure that parents do not end up paying far more than under the current scheme, that parents with care do not receive far less, and that the movement of existing cases to the new calculation rules is as supportive and seamless as possible. If there were to be dramatic cash differences, it would inevitably cause friction in those transfers, which is not what we want to see. We want to ensure that there is relative equality in the cash amounts that parents with care and non-resident parents are paying as the system transfers from one formula to the other.

Mark Harper: Briefly, will the Minister confirm that the current rules that enable a variation in special expenses if a child has special needs will also be available under the new proposals to ensure that disabled children are properly looked after?

James Plaskitt: I think that I am right in saying that those rules carry through to the new scheme. If that is incorrect, I will come back to it.
As I said to the hon. Member for Daventry, we will continue to review the rates of calculation during the course of each Parliament and reclaim the power to amend them by regulation. That enables any changes that are deemed necessary to be made more easily as and when they are required.
I discover that I will not have to write to the hon. Member for Forest of Dean because I have a note saying that I was right.
I urge the hon. Member for Rochdale to withdraw his amendment.

Paul Rowen: I am grateful to the Minister for that explanation. He has answered the concerns that we raised, and I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I beg to move amendment No. 62, in schedule 4, page 63, line 39, leave out paragraph 4.

Anne McGuire: Hello.

Danny Alexander: Good afternoon.
The amendment relates to the
“increase in the flat rate and minimum amounts of liability”
from £5 to £7. It would leave out that section to probe the Government’s thinking as to why they are seeking to increase the minimum amount from £5 to £7. Also, it aims to uncover the justification for the figures. In percentage terms, to go from £5 to £7 is a significant leap. Is that leap because the £5 figure has not risen for some time? If that is the case and Ministers feel that it is important to have a minimum payment going forward that keeps pace with inflationary changes, do they intend to ensure that that figure continues to be increased in future years as circumstances continue to change? What assessment has been made about the impact of such a change? Obviously, the minimum figure applies particularly to people on very low incomes and non-resident parents on very low incomes, such as those taxed on benefit, for example.
Has the Minister made any assessment of the impact that the change will have on poverty, child poverty and poverty of working-age people who may be paying a higher level of reduced rate? If he has not conducted such an assessment, does he intend to ask his officials to do so? This is an open opportunity for him to explain his thinking, to reassure us that there is a consistent and logical basis behind the proposed increase, and to reassure us that the impact that it might have on poverty has been properly thought through.

Andrew Selous: I have one brief question relating to the amendment and paragraph 4 of schedule 4, dealing with the minimum payment, which the Bill seems to be increasing from £5 to £7. Among the people excluded from having to pay that £7 are able-bodied students, many of whom have jobs to support themselves, which is not unreasonable. We expect many students going through universities and colleges to work to some degree. However, all of us are fully committed to the battle to change the culture, so that change can really happen. I wonder whether the provision sends the wrong signal to the student population at large. Someone who is the father of a child while at college or university and is able-bodied and able to help out in the union bar in the evenings or to stack shelves in addition to completing his studies might, as a minimum, be required to pay the £7 referred to in schedule 4, which is the subject of amendment No. 62.

Tim Boswell: As I am now speaking substantively rather than intervening, I should like briefly to welcome you to the Chair again, Mr. Chope, in what has been a constructive discussion. I rise, only tempted by my hon. Friend the Member for South-West Bedfordshire because of my former involvement as Minister responsible for students, to express an interest in his point.
First, on a general point, part of this provision is to give at least a continuing relationship to ensure that people are not disappearing from the map and that there is an obligation to pay some maintenance. That is an important point with analogies to the student loan scheme, where people may be required in certain cases to pay a minimum even if they do not have to pay more than a minimum.
Secondly, my hon. Friend’s point about students was well made, because it is now common—although I will not say universal—for students to work for 15 hours a week. Bodies like Universities UK normally advise students that working up to that level is acceptable, but if a full-time student works above 20 hours it is not acceptable. I suspect that this provision’s exemption for students may reflect the fact that, historically, we have always said that student support was discrete and separate from the benefits system. This is, in a sense, a piece of private law adjusting the relationship between two persons with the Department acting, perhaps, as the intermediary. It is at least worth the Minister’s reconsidering this provision, without pressing him to a final conclusion on the matter.

James Plaskitt: I thank the hon. Members for Inverness, Nairn, Badenoch and Strathspey and for Rochdale for tabling the amendment. I welcome back the hon. Member for Inverness, Nairn, Badenoch and Strathspey; it is nice to see him here.
Let me first restate our firm belief that it is important that parents support their children even when they have a comparatively low income. I shall come back to that point. A flat rate that is applicable to non-resident parents in receipt of benefits or with a very low income is the best way to ensure that these important responsibilities are met, while keeping payments at a level that low-income, non-resident parents can afford.
The hon. Gentleman asked me specifically to comment on why the figure of £7 is in the schedule. It is important to remember that the £5 figure was introduced by Parliament in 2000 and has not been increased since then, so it has remained at a flat rate of £5 for seven years. In looking into this matter, we have taken into account increases in benefit rates since 2000 and have been bearing in mind that the full application of the schedule does not come into effect until 2010-11, at which time it will be introduced in a phased transition that will not be complete until 2013.
Taking into account increases in benefit rates that have already taken place and those that it is reasonable to assume will take place before the measure has full effect, using the inflation forecasts and nothing else, we come to the figure of £7. This is about retaining the real value of the £5 that was introduced by Parliament in 2000 and maintaining a level amount as regards the proportion of income for someone who is on benefit. Exactly the same percentage proportion moves to that cash amount by the time that the measure is fully applicable.

Danny Alexander: I am grateful to the Minister for that explanation, which seems very rational.

James Plaskitt: I am.

Danny Alexander: Occasionally. Given that the rating has been allowed to fall behind inflation over the years, will the Minister comment on the Government’s intentions from 2011 onwards, as regards further updating the figure.

James Plaskitt: I was just coming to that. When the hon. Gentleman was speaking to the amendment he suggested that there might be an annual uprating. A 2 per cent. inflation adjustment is a small cash adjustment, and it is not worth taking the detail of regulations and all the recalculations of amounts through on an annual basis when the cash change is so small. The Government envisage assessing the rating in each Parliament and keeping it in line that way, which is a sensible compromise between ensuring that it keeps pace with the real value while at the same time not overly complicating the system and introducing new annual calculations for timed changes in payments.

Tim Boswell: I endorse what the Minister says and I encourage him wherever possible on this sort of occasion to go for a flat rate because it is much more intelligible. I can report to him that quite apart from recent political events that might have made things even more radical, I look forward to the receipt of the retirement pension in about eight weeks’ time. We are about to have a deeply ontological argument about the entitlement to 49 pence a week, and it is one of those things where one is anxious that it should be got right, but it is a waste of time not to have something that is straightforward and intelligible to people wherever possible.

James Plaskitt: I think that those were words of support and I will take them as such, with appreciation as always.
Students who are currently exempted or zero-rated for maintenance were mentioned. There is an issue here, and I am interested in the view put by the hon. Member for South-West Bedfordshire, because we are trying to address a matter of responsibility. I am prepared to look again at that matter—probably not within the context of the Bill, however, but it does need to be examined. There is a whole variety of students in very different circumstances. All I will say at this point is that the issue merits further consideration. I do not want to go further than that, but in view of the principle of responsibility that we are trying to establish, it is something that I was already minded to examine. With that in mind, I hope that the hon. Member for Inverness, Nairn, Badenoch and Strathspey will withdraw his amendment.

Danny Alexander: I am grateful to the Minister for his answers and explanation. He did not address the point about assessments in relation to poverty, but that may be something that we can pick up at a later stage. With that in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Andrew Selous: I beg to move amendment No. 116, in schedule 4, page 64, line 38, leave out paragraphs 6, 7 and 8.

Christopher Chope: With this it will be convenient to discuss the following amendments: No. 117, in schedule 4, page 65, line 15, at end insert—
‘8A In paragraph 7(4) (the amount of decrease for one child, where the non-resident parent has care of the child overnight) omit the first two lines of the table.’.
New clause 10—Shared care
‘The Secretary of State must, prior to the establishment of the Commission, publish a report which analyses whether the reduction in maintenance due to share care, or any other factor, is leading to a reduction in shared care.’.
New clause 18—Maintenance agreements in cases of care shared equally
‘The Secretary of State may by regulations determine maintenance agreements to be calculated in instances where care is shared equally by both parents; and those instances are to be determined by the Commission.’.

Andrew Selous: We move onto another important part of the Bill. It is a thorny topic and one that it is important to get right for the success of the Bill and for the general welfare of the children of separated couples throughout the country—it is the issue of shared care.
Amendment No. 116 is a probing amendment. It would delete the three paragraphs in schedule 4 that deal with shared care. It is worth briefly re-capping the current provisions, in that the Child Support Act 1991 allows the non-resident parent’s child maintenance liability to be reduced:
“If the care of a qualifying child is shared”.
The Bill will allow a reduction where the care is, or is to be, shared.
Under the new scheme introduced by schedule 4, child maintenance will be fixed for a 12-month period, and at the point when the liability is fixed, shared care arrangements, which in this context are interpreted as the child staying overnight with the other parent, may not have started. Unless the rules are changed, that could lead to a situation in which the non-resident parent’s liability takes no account of actual shared care arrangements for the first 12 months, so I understand the need for the particular paragraphs under discussion. The Bill therefore allows a reduction in child maintenance liability in anticipation of future shared care arrangements during the period of assessment, but that in and of itself obviously raises a number of questions worthy of debate and on which I would seek the Minister’s response.
Given that the thrust of the Bill is to encourage as many parents as possible to take the voluntary arrangement route, it means that the parents going to CMEC will be those who have more contentious problems and who find it more difficult to agree. It is therefore reasonable to assume that those parents are more likely to be in touch on a range of issues, including the all-important one of contact.
How will the commission determine whether the care of the child is to be shared? How will the extent to which the couple agree about shared care arrangements and the robustness of that agreement be determined? What help, if any, will parents get in reaching an agreement on shared care? What additional support for separating parents do the Government, through the Minister’s Department or the Department for Children, Schools and Families, propose to help them to reach agreement on contact arrangements and maintenance?
I want to take the Minister back to Australia again. He will probably not thank me for that but it is important to make him aware that the family relationship centres in Australia have been “swamped”—it is their word—by the demand from separating parents seeking help, support and guidance. I urge him to ask his officials to make contact with the Australian CSA on that point. The main objective of the family relationship centres is to do more preventive work to help to prevent couples in relationships and marriages from breaking apart in the first place, and I heartily support that work.
It is also part of the remit of family relationship centres to provide help for separating couples to ensure that the arrangements for contact with children are as civilised as possible and to help to provide support, education, advice and assistance, perhaps even bringing in the grandparents and so on. It is that part of the service that has experienced massive demand. We need to learn from that and to ensure that the arrangements in place in the UK are put into place in the light of the Australian experience.
It is also important to know what avenues will be open to either parent when the contact agreement that formed the basis of the child maintenance calculation has either broken down or been altered by agreement. Will there be any grounds for a supersession when the parent with care and the child are losing out financially because the non-resident parent is not providing shared care on the basis represented to the commission? The Minister is very keen to have 12-month financial agreements for shared care. I understand the haunted look in his eyes about what has gone on before; I also understand exactly where he is coming from, but these are practical issues to which we need answers. If he does not have all the answers now, I hope that he will agree to reflect on the issues before Report. The Committee would take comfort from that.
Some specific questions arise from amendment No. 116. In what situations will the commission proceed to adduce child maintenance liability based on a prescribed assumption of shared care, and for how long will that prescribed assumption continue? That raises another point: whether there will be a presumption of shared care which could be rebutted by the other parent if they chose to do so.
Amendment No. 117 is different in nature and I shall explain to the Committee what it means if it is not immediately obvious. At the moment there is a presumption that children can spend two nights a week apart from the parent with care, with no reduction in maintenance liability. That is 102 days within any year, which is 52 weekends times two.
The present rule allows that for each night a child stays with a non-resident parent—worked out as an average over a 12-month period—child maintenance liability is reduced by one seventh. In practice, that means that there is a strong financial link between the amount of contact and the amount of child maintenance paid. That leads to disputes over contact arrangements, particularly when there is already conflict and mistrust between the parents. Under amendment No. 117 there would be no reduction in maintenance paid if the qualifying children were spending, on average, up to three nights a week with the non-resident parent.
Obviously these discussions cut both ways. There is the issue of the cost to the non-resident parent: non-resident parents might be up in arms because they would get less money. That is a valid argument and I accept it, but it is outweighed by the strength of the reverse argument which says that this would remove the financial friction between the non-resident parent and the parent with care over getting extra nights of residence for the child. We are effectively talking about another 52 days a year which children could then spend with their non-resident parent. The parent with care would not have to say, “No, I do not want that as it will reduce my liability,” and would be more likely to agree to a week at Christmas, a week at Easter and two weeks in the summer. I shall be interested to hear the Minister’s response.

Stephen Hesford: How do the hon. Gentleman’s amendments impact upon the idea of a voluntary arrangement?

Andrew Selous: Where there is a voluntary agreement it does not come within the ambit of CMEC and parents are free to make their own arrangements. I understand the point that the hon. Gentleman is making because I made the point at the beginning of my remarks that we are dealing with that subset of separating parents who have been unable to reach a voluntary agreement and where there is likely to be more conflict. I shall quote in a minute from a solicitor who specialises in family law because she goes through some of these issues. The proposal in amendment No. 117 would lead to a reduction in friction. It would enable children to stay with the non-resident parent more frequently because the parent with care, typically the mother, would not want to have to trade handing over her children for a reduction in her maintenance payments.

Danny Alexander: Before the hon. Gentleman leaves that point, may I ask him how his amendment would affect those people whom we discussed under the previous amendment who are paying the minimum amount of maintenance? As I understand it, currently if the non-resident parent has care for one day a week, the minimum maintenance figure is waived because that parent is taking a degree of responsibility. Would that be the case under his amendment, too?

Andrew Selous: The hon. Gentleman has picked me up on something that I should have mentioned. It was towards the bottom of my notes, but I can answer his question directly. The amendment does not alter the rules that apply when the non-resident parent is on benefit. Here there is a fixed contribution which will go up to £7 a week. The amount is waived completely if a child stays overnight with a non-resident parent for at least one night. Given the low income of NRPs on benefit, it would be inappropriate to raise the shared care threshold of three nights for that group. Therefore, that would not affect that group. I am grateful to the hon. Gentleman for raising that point, which needs to be on the record.
On new clause 10, I want to make a number of points that were passed on to me relatively recently by a solicitor specialising in family law and an academic who works in the area. The solicitor, writing about cases that she had dealt with relatively recently, stated that
“the fact that child support would be reduced once”
the parent with care
“agrees to the children staying with their father at least one night per week can cause a reluctance to encourage contact.”
I have just made that point to the Minister.
The solicitor then made an important point about the benefits system, child benefit and tax credits—it is important to link tax credits with this discussion because they have significant effects on the finances of both the parent with care and the non-resident parent and can have a significant bearing on the issue of shared care. She wrote:
“The problem with the tax credit system for these separated couples is that tax credits are only paid to one parent and there is therefore no recognition in the system for shared care arrangements...I understand that tax credits are paid to the parent who claims child benefit.”
For the Department, that is the determining factor for deciding which parent is the parent with care and which is the non-resident parent. We understand that that is the key decision. The solicitor continued:
“I come across many fathers who may see their children up to 3 days a week but get no financial support for them. In fact, if they are working they could be doubly penalised by paying child support. I recall one father in particular who was claiming jobseeker’s allowance and showed a real determination and commitment to his children to maintain a meaningful relationship with them even though their mother did what she could to prevent it. The case, perhaps inevitably, went through court and he was awarded shared residence of 3 nights per week. The mother retained her child benefit and tax credits and the father struggled to survive on his income based job seeker’s allowance, receiving no additional monies for caring for his children nearly half the week.”
I hope that you will forgive me, Mr. Chope, for putting that on the record, but I think that it is important to come down to some individual cases.

Danny Alexander: The hon. Gentleman has highlighted an interesting case, but clearly had the non-resident parent been in work he would potentially have been entitled to at least some tax credits through the working tax credits, so the system is not quite as black and white as the hon. Gentleman is trying to make out.

Andrew Selous: The hon. Gentleman’s point about the father I have just mentioned being in work is, of course, right. Nevertheless, the facts that I have put on the record about the father being in receipt of jobseeker’s allowance shows how that situation is quite unfairly skewed, given that that father had been given residence of three nights per week by the court.

Michael Weir: I am following what the hon. Gentleman is saying with interest as I have had a similar case. One thing that worries me slightly, however, is how income is to be determined for tax credits when two people in separate households claim them. It seems to me that there is a serious danger of overcomplicating the system in that respect; there will have to be separate tax credit applications for both parents in that circumstance.

Andrew Selous: The hon. Gentleman is right. We are certainly into the area of complication, but we are trailing a refining of the system for some particularly rough justice. The hon. Gentleman will have constituents, as I will—as we all will—who will find themselves quite aggrieved.
If the Committee will bear with me for a few moments longer, I shall conclude shortly, but I want to mention one other case that, again, was drawn to my attention by an academic working in this area who is pretty exercised about the point. He drew to my attention a case where two separated parents were sharing equally the cost of bringing up their children. The children were spending an equal amount of time in each parent’s home and the family court had recognised their equality of rights and responsibilities by granting a shared residence order. However, one parent was receiving almost 20 per cent. more disposable income than the other as a result of the child maintenance transfer even though both had identical costs and expenses in relation to their children. The parent with care was obviously receiving child tax credit and child benefit.
The parent with care was the father in that case. That gentleman wrote directly to the Minister to raise the issue and got a reply from the ministerial correspondence unit:
“It should be borne in mind the formula is designed to reflect the ability of both parents to contribute to the maintenance of their children”.
He is quite exercised about that and describes it as a significant “injustice” about which he is concerned the Bill will do nothing. I recognise that the issues are complicated, and that there are fixed costs and variable costs, but the Bill is quite light in that area. Given that we are setting up a system that we all hope will be in place and robust for many years to come, I am not asking for detailed answers from the Minister now. However, I ask him to go away and reflect a little more on some of those shared-care issues, particularly when child benefit and tax credits come in and where there is equality. They can cut both ways for all our constituents, and we have not considered them in sufficient detail. I would be interested to hear what he says in response to this section of the debate.

Danny Alexander: I failed in my earlier intervention to welcome you to the Chair, Mr. Chope. I apologise; I am delighted to serve under your chairmanship once again. These are difficult and complicated issues, particularly those to do with shared care. The point that the hon. Member for South-West Bedfordshire made towards the end of his remarks was right: there are a great many complications from family to family in respect of what shared care and the degrees of care that are shared mean in terms of the financial commitment that parents make. A variety of other costs enter into the equation, both fixed and variable. That is why the amendments highlight an important issue. I will be interested to hear the Minister’s response to some of the points. I am grateful to One Parent Families, among others, for the briefing provided for this short debate. I hope that the Minister can provide reassurance on some of the points that the hon. Gentleman has rightly made about the amendments.
The hon. Gentleman did not particularly help the case with his comments on tax credits and child benefit, not least because his party has been particularly keen to highlight what has been described as the couple penalty in the tax credit system. To have some sort of system whereby tax credit payments are divided up on some basis seems to go against the argument about the family that his party has been making on that point. I am not saying that it is right or wrong, but that there is a degree of inconsistency in the points that are being made.
The right approach is taken by new clause 18, which seeks to recognise the complexities by trying to give a degree of flexibility in such issues to the commission. It is unclear in the Bill—the Minister may be able to clarify—whether instances of equal shared care, that is 50:50 or thereabouts, will require a maintenance arrangement or not. David Henshaw’s report and that of the Work and Pensions Committee recommended that cases of 50:50 shared care should be exempt from third-party involvement, with no provision within the child support formula for transferring funds between parents. As a member of that Select Committee, the hon. Member for Weston-super-Mare might well choose to contribute to this debate—it is a relevant point.
Equally, the Department for Work and Pensions report entitled, “Child Support Policy: an international perspective” showed that payment obligations in many other countries, such as Australia, Canada, New Zealand, Norway, Netherlands and France, on parents in cases of equal shared care would be reduced to nil and that, in the majority of countries, payments between all shared care couples would be annulled completely regardless of disparities in parents’ incomes.
The hon. Member for Weston-super-Mare might wish to intervene, because I am not sure whether that is correct, which is why we have proposed new clause 18, which would allow the commission a degree of flexibility. There is a danger in assuming that where there is 50:50 shared care neither parent needs any financial maintenance whatever. That does not follow. One of the founding aims of the child support arrangements in this country, inadequate though they have been, was that parents should have a duty to share resources with their children when separated as when they are married or in a partnership.

John Penrose: Given that I have been invited twice, in tones of increasing desperation, let me outline quickly what the Select Committee recommended on that point. The report stated:
“The Committee recommends that the statutory child support system moves away from the current system of overnight liabilities which causes day counting and diary keeping by parents and constant readjustments”—
this is the point about the friction between parents with care and non-resident parents, which my hon. Friend the Member for South-West Bedfordshire was making earlier. The report continued:
“In the Committee's view the ideal solution is that there should be an initial agreement between the parents and C-MEC on the approximate amount of time the children spend between the two households. This should govern the assessment for the remainder of the year and not be adjusted unless there are major contact changes. For arrangements with close to 50:50 shared care the Government should consider the case put by Sir David Henshaw for having no child support liability at all between parents”.
The Committee did not recommend necessarily that the Government should take up that recommendation outright, because of the concerns about fixed and variable costs. Clearly, however, the recommendation contains a degree of sense, which we hoped that the Government would take up. I point out also that it was adopted unanimously in Committee, including by the hon. Member for North-East Derbyshire, who is sitting behind the Minister today.

Danny Alexander: I am glad that all of those points, including the final one, have been put on the record.
I am worried about going down the route of saying that there should be a nil assessment in such cases because of the point that the hon. Member for Weston-super-Mare made about friction. It could equally well be the case that where not only 50:50 shared care is the most appropriate arrangement, but where there is significant financial disparity between parents, the most sensible arrangement cannot be reached because one parent objects on the grounds that if they went for the shared care arrangement, the sharing of income that should take place would not.
New clause 18 seeks to ensure that the commission would maintain the flexibility necessary to assess such cases. I think that that is the right way to go, and I would be interested to know whether the Minister agrees and, if so, whether he feels that it should be done through the new clause, or that the Bill contains the necessary provisions. Certainly, however, that needs to be teased out a bit further so that he has the chance to put on the record the Government’s intentions in relation to those cases. No doubt the commission will look to his words during our discussions on the provision of guidance to it when it seeks to make arrangements in such cases.
It is important that where shared care arrangements are in place—be it 50:50 or a variation of that, such as 30:70 or some other proportion—there remains some ability to take into account the financial disparity that might exist between parents, in order to ensure financial fairness as well as fairness in relation to care. Both those things are important in ensuring that the children, who should be the focus of our attention, get the arrangements that are most suitable to there needs.

James Plaskitt: Once again, I am grateful to the hon. Members for South-West Bedfordshire and for Inverness, Nairn, Badenoch and Strathspey for tabling the amendment. I am also grateful for the helpful intervention from my hon. Friend the Member for Wirral, West and for that of the hon. Member for Weston-super-Mare—it was helpful to me, but I am not sure whether it was helpful to those on his Front Bench.
As everybody acknowledges, this is a very difficult and sensitive area and one in which we must tread with great care. I begin with some of the thoughts that we had from the hon. Member for South-West Bedfordshire in moving the amendment. Listening carefully to what he said, he demonstrated the extreme difficulty and the risks that we would take were we to go down the road that he suggested. Let me explain why I think that.
In the hon. Gentleman’s approach, there was a tendency to be rather mechanistic about the matter. We almost arrived at a sort of daily rate for looking after a child, and that departs from the reality in which most separated couples live.
There is, of course, a certain amount of continuous cost involved in having children. However, for most parents who have separated and who are dealing with the costs of children, the real contentions are found on the sizable one-off costs that arrive at intermittent intervals—the school uniform, the new shoes, and these days there are iPods and that sort of stuff. That is where the difficulty arises, rather than the daily charge and how much it costs to have the child at home for one day or one night. It is not territory that I think most separated parents get into, and for that reason I would not want to see the commission try to get into it either, just as the CSA would not have been advised to do so. That is one reason why we must treat the issue with considerable care.
The other potential danger, which it is crucial to avoid, is the risk of turning access into a bargaining counter between separated parents. We must do everything that we possibly can to avoid that happening, as that would never be in the interests of the children and their long-term upbringing or emotional stability. Those are important warnings against some of the arguments that I think the hon. Gentleman was using in support of his amendment. We must proceed more cautiously in this area.

Andrew Selous: I agree with the Minister’s point about not linking access and maintenance—these can be vexed issues for non-resident parents if they are dealing with both subjects at the same time. He is right in that, but would he acknowledge that the current system leads to some conflict, particularly when the parent with care does not want to see her maintenance reduced? That is quite understandable, and I would defend her right not to see her maintenance reduced. As the Minister helpfully outlined by way of an example, the costs of a school uniform, new shoes, iPods and so on are probably in most cases being borne by her, rather than by the non-resident parent, although he may be contributing.
Will the Minister acknowledge that the present system leads to conflict? That is the experience of family lawyers to whom I have spoken, and we should look at ways to reduce that potential conflict—something that amendment No. 117 would do.
My final point, and I will be brief, is that I wonder whether there is scope to look at the difference between fixed and variable costs. I quite understand that the cost of rent, council tax and some major items are fixed, but I wonder whether there is scope for designating some costs as variable, which would be applicable to the non-resident parent.

James Plaskitt: All I can see in front of my eyes as the hon. Member speaks is huge complexity. It really is not a route that we want to go down. We must do everything that we possibly can to keep this as easy to administer as possible, and I can see us going towards an incredibly unwieldy system if we follow the route that he suggests. That is why, in the end, we proposed no substantive change to the shared care rules—the consultation on the child maintenance White Paper revealed no consensus among major stakeholders on any fundamental change to the arrangement. In our view, that reflects the fact that it is a difficult issue. Most of the issues that we have teased out during this brief debate are finely balanced.

John Penrose: Does the Minister accept that although there might not have been a huge consensus on what must be done to change it, it is not necessarily true that the current system avoids the problems that he has described? The system of day counting and continual record keeping both is unwieldy in itself and creates the sort of unintentional and unwanted frictional links between access and maintenance that he rightly says we want to avoid if we can. The current system is not perfect by any means.

James Plaskitt: I am certainly not claiming perfection for it. I would not dream of it, because of the complexity of the matter and the circumstances with which we are dealing. With respect, the amendments that we have been asked to consider would not ease that situation. They will not achieve perfection either; I think that they would make the situation more different. We found during the consultation that people could point to frictions arising as a result of the arrangements, but no one could tell us what changes would overcome or resolve them. That is the difficulty. After distilling the consultation, we came to the conclusion after careful consideration that it is best not to make any substantive changes. In speaking in more detail about the specific proposals, I share try to reinforce that point.
The amendment would remove all changes to schedules designed to ease the process of making decisions about shared care. The agency has often found the issue difficult, because information about the shared care arrangements is of poor quality or disputed by the parents involved. The Bill’s proposed changes will assist the commission by allowing parents to reach an agreement regarding the principles of shared care without having to agree on the details during what can be a stressful and uncertain time for both parents.
We intend to reduce the maintenance liability of non-resident parents by a set amount for up to six months in cases where the details of shared care have not been agreed. We believe that that period will help parents reach amicable shared care arrangements. The reduction in maintenance liabilities will also allow parents to get used to the level of maintenance that they will pay or receive when a more permanent shared care agreement has been established. The rules will allow more flexibility in the early days of separation, so that parents are not immediately tied into a maintenance liability under a system of fixed-term awards. By reconsidering shared care after six months if necessary, the commission will be able to take account more quickly of any changes to shared care arrangements.
If parents can agree a pattern of shared care during or at the end of the six-month period, the new powers will allow the commission to take account of that agreement. If they cannot agree on the level of future shared care, the six-month period will give the commission appropriate time to judge existing levels of shared care and make any appropriate reductions in maintenance.
We are continuing to investigate the specifics of the interim shared care decision, which is not an easy matter. When final decisions have been made, we will set them out in regulation. The amendment would remove the advantages of the more flexible approach and tie parents into a year-long shared care decision, when arrangements are likely to be at their most unsettled. That would benefit neither parents nor children and would further limit the ability of shared care rules to work in everyone’s interests.
Under amendment No. 117, maintenance would not be reduced, unless the non-resident parent cared for the child for at least 156 nights a year, or three nights a week on average. In the 2003 scheme, about one fifth of non-resident parents received a reduction for shared care. Where shared care occurs, it lasts in most cases for fewer than two nights a week. Only one in 10, or 2 per cent. of the entire caseload, cared for their children for 156 nights a year or more. The Government’s view is that we ought to encourage shared care because children almost always gain from the continued involvement of both their parents in their lives, whether or not their parents live together.
The reduction in maintenance recognises that shared care invariably involves non-resident parents incurring extra expense, which can be substantial. The rule offers a simple and transparent incentive for non-resident parents to share care. A higher shared-care threshold might deter many non-resident parents from active involvement with their children, which would clearly be to the detriment of everyone involved. A sizeable proportion of non-resident parents have relatively modest incomes and could be forced to choose between paying child maintenance and having their child with them, whereas they may currently do both. Others may question why they ought to pay full maintenance, when they already incur significant costs in looking after their child.
The Government therefore consider that the current threshold of 52 nights is correct. It requires a level of care that many non-resident parents ought reasonably be able to consider and prevents reductions in maintenance for lesser amounts of care. It also means that the reduction would apply in what is believed to be a fairly common pattern of care, namely when a non-resident parent has their child every other weekend.
New clause 18 would give the Secretary of State the discretion to make regulations for the calculation of statutory child maintenance in instances of equal shared care and enable the commission to determine what such instances might be. However, the new clause is unnecessary, because the scope to make regulations for such cases is given by provisions of the Child Support Act 1991 that are not affected by the Bill.
We recognise that a case of equal shared care will not feature a situation in which a parent clearly attempts to avoid their responsibility to maintain their child. Some have queried whether there should be a liability at all in a case of equal shared care, a point of view reflected in Sir David Henshaw’s recommendation last year that such cases should not be within the scope of the commission. However, there is an opposite way in which to look at such instances. The income of the parent with care tends to be lower than that of the non-resident parent and, in some cases, the differences could be substantial. In those situations, there might still be a case for the non-resident parent to provide additional financial support above what they give when the child stays with them. The matter is not straightforward, and in such situations the Government need first to give careful consideration to what is best for the child and, secondly, to the most effective means by which any outstanding needs can be met.
The current incidence of equal shared care in the agency’s case load is small, and we expect it to reduce further when all parents are free to come their own arrangements. Many parents who have agreed how their children are to be cared for ought to be able to agree whether there is a need for maintenance to be paid. Accordingly, we wish to involve the commission in arriving at the right way forward in cases of equal shared care. Although we have made no decisions on the matter, any new provisions will be presented in secondary legislation, which will be subject to the affirmative procedure to give Parliament the opportunity for scrutiny and debate. In summary, we want the shared care rules largely to remain as they are, but we will continue to examine the details of rules regarding cases of equal shared care.
New clause 10 would require the Government to publish a report, before the commission comes into being, on whether a lower maintenance liability, either because of shared care or another reason, results in fewer cases of actual shared care. We have a range of evidence from research that shows that non-resident parents strongly support the principle that time spent with children ought to be recognised when setting maintenance rates, but there is less support from parents with care. In addition, we are conducting a large-scale survey that will provide much better information on current levels of shared care, on which we expect to report in spring next year. Our view is that it would not be possible to commission research that provides a robust assessment of the impact of the shared care rules on behaviour. We would be reliant on parents accurately reporting that they had denied contact solely because of shared care rules and would be extremely wary about the quality of information collected in such a way. However, we will continue to review all the evidence and work with our stakeholders to assess whether the detail of the shared care rules can be further improved. With those reassurances, I hope that the hon. Member for South-West Bedfordshire will withdraw the amendment.

Andrew Selous: The amendment was always a probing amendment, as I made clear at the beginning of my remarks, so I am happy to withdraw it. I am grateful for the Minister’s comments and recognise that the matter is complex. The hon. Member for Wirral, West, put his finger on it when he talked about the importance of voluntary agreements, and if I draw one conclusion from the debate it is that parents who feel strongly and have contentious issues arising would be well advised to go down the voluntary route so as not to be subject to the complicated rules. I am grateful to the Minister for his response, and I shall study his remarks carefully and reflect on how we can go forward. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Danny Alexander: I beg to move amendment No. 83, in schedule 4, page 65, line 28, at end insert—
‘(c) provide for the calculation of income to include any interest, dividend or other income derived from capital.’.

Christopher Chope: With this it will be convenient to discuss new clause 15—Prevention of maintenance avoidance by non-resident parents
‘(1) The Secretary of State shall by regulations provide that—
(a) where the Commission is satisfied that—
(i) a person has deprived himself of income or capital with the effect that his gross weekly income is reduced; and
(ii) the effect of that deprivation is to reduce the amount of his gross income by at least 25 per cent below that which it would otherwise have been; and
(iii) in all the circumstances of the case it would be reasonable to do so;
his gross weekly income shall be taken to include income from that source of an amount estimated by the Commission.
(b) in determining what is reasonable under sub-paragraph (1)(a)(iii) above, the Commission shall regard the person’s obligation to support his children of paramount importance.
(2) The Secretary of State may by regulations provide that, in such circumstances and to such an extent as may be prescribed—
(a) a person is to be treated as possessing income which he does not possess; and
(b) income which a person does possess is to be disregarded.’.

Danny Alexander: I shall be relatively brief in moving the amendment, although it raises a significant issue that is worth spending a little time on. It addresses the involvement of income from
“any interest, dividend or other income derived from capital”
in maintenance assessments. As the Committee will know, income is currently treated differently, depending on whether it falls under the old or new scheme. Under the 1991 Act, dividend income was taken into account by way of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992, with which I know the Committee will be familiar. In the Child Support, Pensions and Social Security Act 2000, however, the definition of “income” was severely restricted. Under it, the scheme defines net income specifically as earnings from employment, income from self-employment, tax credits and other income that has been restricted to pensions or other benefits under occupational pension schemes and so on.
As I understand it, both definitions will continue under the new regime. There is no reference in the 2000 Act to interest, dividends or other income derived from capital, as was provided for in the 1991 scheme. I understand that such income can be considered only if applied for by way of a variation by the parent with care. That arrangement will continue under the Bill, which will potentially create significant anomalies.
The subject of people who derive substantial income from capital but manage to shelter it for tax purposes has been debated a great deal in relation to private equity fund managers, for example, who, it has been widely reported, pay considerably less tax on their income than their cleaners. That will probably still be true today, even after the announcement in the comprehensive spending review. If such income is not taken into account at the first stage, someone with a substantial income from capital could have a relatively low initial maintenance assessment, because of how the rules about what should be considered income and what should not are drawn up.
The Minister may well argue that the ability of parents with care to apply for variations should allow such egregious differences in income to be taken into account, but the practicalities of that are complicated and difficult. It has proved quite difficult for parents with care to be successful in applications for variations under the Child Support (Variations) Regulations 2000.
Of course, if one goes down the route of variations, that still leaves the onus on the parent with care to make an application. They may be unaware of any income, substantial or otherwise, derived from capital, dividends and so forth. Even if they do know that information, they might assume that it has been taken into account.

Stephen Hesford: Is the hon. Gentleman talking about the commission looking to make a notional calculation of weekly income on capital or a calculation of actual income?

Danny Alexander: The hon. Gentleman has made a good point. As drafted, the amendment refers to actual income, although he may argue that the income should be notional. I would be happy to hear that, and it might be worth debating, if the amendment were accepted. However, as drafted, the amendment does not make that distinction and thus would refer only to actual income.
I was talking about variations. I foresee problems with leaving the variation system to bear the burden of dealing with cases when such gaps occur. The Minister might argue that the amendment could lead to a significantly increased administrative burden on CMEC, because additional income information would have to be taken into account. At the very least, that is debatable, because processing variations also imposes an administrative burden.
Let us bear in mind that HMRC has much of the information, so it could be part of the data-sharing arrangements between it and CMEC. If CMEC were to get into the habit of arranging matters on a regular basis and that was part of the information that had to be provided at the beginning, the arrangement that we are proposing to ensure that such income sources would be included from the beginning could be at least as administratively efficient. Such arrangements would certainly not impose any undue extra burden. The cases to which I am drawing attention are those when substantial income might not have been disclosed or taken into account in the basic calculations.
There is also the other problem that sometimes taking income in such forms from capital can be a way of avoiding a full income being taken into account in respect of a maintenance assessment. The amendment makes an important point, and I hope that the Minister will give it fair consideration. It would improve the chances significantly of ensuring that the full income of a non-resident parent is taken into account when a maintenance assessment is made.

Andrew Selous: I listened with interest to hon. Gentleman. I must admit that I am in broad agreement with the points that he has made. It is a curious anomaly that some sources of income are not taken into account in the calculation. I imagine that that sentiment is shared fairly broadly on the Government Benches. It is interesting that the Department’s research report No. 285 of 2005 by Atkinson and McKay, “Investigating the compliance of Child Support Agency clients”, found a widespread belief among working non-resident parents, and particularly those in the civil service, some of whom are in the Room, and the armed forces, that they were easy targets for the Child Support Agency.
It was reported that there was resentment that those with the ability to control their income find it easier to evade paying child maintenance at a level that reflects their true income. It has also been reported that that resentment fuels non-compliance, because people are unhappy at having to pay when others can get away with it. Those on PAYE who have a regular job are easy targets, while those who control their own business or those who have complicated family financial arrangements and can set up dividends or have money diverted to their partner get off. That leads to a sense of unfairness and to people not wanting to comply. It is all part of the culture, which we are right to mention so often. It is important to make sure that we have a culture in which the system is perceived as fair and equitable. I shall listen with interest to the Minister’s response to amendment No. 83—I am certainly in favour of it.
New clause 15 should go hand in hand with amendment No. 83. One without the other would not provide the full toolkit that the Minister will need to make a success of CMEC. The new clause would give the commission powers to look at what exactly a non-resident parent is doing to try to deprive himself or herself of income. Paragraph (b) states that
“the Commission shall regard the person’s obligation to support his children of paramount importance.”
That is a key phrase, which is necessary to direct Her Majesty’s Revenue and Customs and the commission on how to act in such cases.
When the Minister responds, I imagine that he will say that the measures are not necessary, because there are existing powers under the 1991 Act. Technically, he would be correct, but I think that he would also agree that the Secretary of State has in the past failed to use those powers and that, in practice, the grounds on which a departure or variation can succeed are complex, tightly drawn and, frankly, difficult for parents with care to access.
New clause 15 would require the Secretary of State to make regulations dealing with this issue, rather than it being left to their discretion. The amendment would establish that in determining whether it is reasonable to apply this provision, the commission should pay due regard to the importance attached in public policy terms to the non-resident parent properly maintaining his children, having regard to his actual ability to pay. We all know from our case loads that it is the issue of non-resident parents who are able to be clever—as they would see it—that causes us and our constituents the greatest concern and which has led to some of the most severe and, perhaps, justified criticism of the Child Support Agency. It feeds a culture of resentment towards the agency that some people are perceived as getting away with it.
The amendment and the new clause are intended to give the Minister the tools to do the job properly, to reduce that sense of resentment and unfairness and to make the system work properly, as far as all parents with care are concerned.

James Plaskitt: I am grateful to the hon. Members for Inverness, Nairn, Badenoch and Strathspey and for South-West Bedfordshire for their speeches in support of the amendment. I am also grateful for the important intervention by my hon. Friend the Member for Wirral, West. Let me try to reassure them about our intentions.
We agree that we should consider whether the commission should have a means of dealing with non-resident parents who intentionally deprive themselves of income in order to reduce their maintenance liability and those who have significant sources of income that are not currently taken into account in the main scheme. However, we must consider the appropriate place to take account of such complex financial circumstances. Taking account of deprivation of income, as new clause 15 would enforce, entails the commission deciding whether any observed reduction in income is intentional or reasonable, which would potentially cause significant delays in the processing of such cases.
As has been pointed out, the Secretary of State has the power to make those regulations and has done so for the 1993 scheme. However, these powers were not used for the 2000 scheme precisely to avoid such complex circumstances. We believe that that is the right approach. To introduce regulations to tackle the small number of non-resident parents who successfully deprive themselves of income into the new arrangements would add unnecessary complication and, therefore, cause additional delays in finalising maintenance calculations and ensuring the flow of money to children. If these powers were applied, we would risk creating considerable additional work for the commission by casting doubt on the income information supplied by all non-resident parents. Similarly, on amendment No. 83, it is vital that the definition of income in the new statutory maintenance scheme reflects operational realities. I know that hon. Members are well aware of the pitfalls in making maintenance calculations too complicated. Indeed, they may recall that the definition of income used for the first scheme was far too broad and caused the agency, children and parents significant problems, as evidence often proved difficult, if not impossible, to obtain, made little difference to the maintenance due and opened the system to abuse and delay by non-resident parents.

Danny Alexander: I am grateful to the Minister for making that point. However, is it not the case that the information on types of income referred to in amendment No. 83 is routinely collected by Her Majesty’s Revenue and Customs? Surely some of the proposals in the Bill reflect the idea that the Minister has advanced about having a closer relationship with HMRC, which I support and would perhaps go further on. However, if there is to be a data-sharing arrangement, surely it would apply to these categories, which would mean that where the HMRC holds information it can routinely be taken into account.

James Plaskitt: I am afraid that the issue is more complicated than the hon. Gentleman imagines, as is often the case with such issues. HMRC has some of the information to which he is referring in a form that is easily attributable to individual taxpayers, but not all of it is attributable, so the matter is more difficult.
We are clear that the amendments would not allow a workable definition of income. If legislation were to require all those items in their entirety to be taken into account on the initial calculation, the operational effects of the amendment would be extreme and adverse. If commission staff were expected to investigate every bank account, every dividend and every piece of capital where there was the potential to earn income by a non-resident parent, the calculation process would become unworkable.

Paul Rowen: Considering the Minister’s earlier comments about not all information being owned by HMRC, does he not think it important that our new clause 6—or something like it—is included? That would give the commission the power to carry out such investigations and respond to issues raised by parents with care.

James Plaskitt: No, absolutely not. We are not going back to trying to set up the commission as an investigatory body charged with the duty of looking into people’s personal finances. We know how complex that task is, and it is not the purpose of the commission. The answer to the hon. Gentleman’s point lies in other means, and the other changes that we are introducing in the Bill come closer to answering his concern than his suggestion. Basing the assessments on tax data and having the tie-up between HMRC data and the commission is important, as are the annual fixed-term assessments, the new sanctions, which we will come to, and the existing sanctions for not revealing information. That is where the answer to his point lies, rather than in trying to invent a new financial investigatory authority, which it is inappropriate to ask the commission to do.

Andrew Selous: I am grateful to the Minister for giving way; he has been very courteous. I apologise if he has already given this answer, but I am still not clear why amendment No.83 would cause problems, if we were to use tax data from the previous year. Why can the information not be transferred in the same way as income data? Why would that cause any extra work for CMEC? Frankly, as a matter of tax evasion, if the information is not there, one would expect HMRC to deal with the matter anyway. I am still not clear on that point from the answer that the Minister has given.

James Plaskitt: That might be because I have not reached the end of my contribution. As I go on, I hope that that issue will become clearer. The amendment would even require current accounts with incomes as low as a few pence a week to be included in the maintenance calculation. Almost every non-resident parent would have such assets, and the additional work load for the commission would simply mean that it would not be able to function properly.
We believe that the variations scheme is the place to deal with the kinds of complex financial matters that the amendments seek to address. The variations scheme already contains grounds for including dividend income, investment income and income from assets in maintenance calculations. In addition, we already have the power to introduce grounds for a variation to cover intentional deprivation of income, and paragraph 9 of schedule 4 to the Bill will carry forward the powers to estimate income, where the information relating to a non-resident parent’s income is believed to be inadequate or unreliable. We believe that those powers specifically, and the variation scheme more generally, are the best means of taking account of the difficult circumstances that the amendments address, without unnecessarily impacting on the majority of cases to which the circumstances do not apply. It is a question of a proportionate response to the scale of the problem.
Let me add—I hope that this will reassure those who have spoken in support of the amendments—that we are currently meeting stakeholders, including One Parent Families, to discuss the best way to deal with those complex issues and to decide the best way to deal with the circumstances in practice. We are also investigating ways to strengthen the variations regime to help ensure that non-resident parents’ liabilities accurately reflect their ability to pay. In addition, we will be taking advice from the new commission before introducing the necessary secondary legislation to address the issue. Depending on the outcome of those discussions, we will implement strategies to help ensure that non-resident parents are unable artificially to reduce their maintenance liabilities by depriving themselves of income or disguising their true ability to pay assessed maintenances. I hope that those reassurances will enable hon. Members not to press their amendments.

Danny Alexander: I am grateful to the Minister for his response. He has understandably and rightly said that there will be further consultation, discussion and debate with stakeholders and representative organisations. However, I am still not convinced that he has answered my point about the problem of putting all the burden on the variations regime, in that it still requires the parent with care to come forward and apply for variation, which makes assumptions about the parent with care’s knowledge and their willingness to come forward for a variation, having gone through what may already have been a very lengthy, bureaucratic and delayed process to get the assessment in the first place.
Therefore, it is not my intention to push the amendment to a vote at this point, but it is an issue that we need to come back to at a later stage. Although the Minister’s criticisms of the range of issues contained within the amendment may have raised an important point, to rely solely on the variations regime to deal with such cases runs the risk that non-resident parents with significant income from non-income sources would be able to avoid paying proper maintenance to their children. That is a circumstance that I think everyone in Committee wants to avoid.

Andrew Selous: At the appropriate moment, I would like to press new clause 15 to a vote. I have listened carefully to the Minister, but I still do not feel that I have an answer to the extreme frustration expressed to me by my constituents who know that their ex-husbands or ex-partners are rearranging their financial affairs in such a way as to pay a minuscule amount of maintenance. I think that the new clause would go some way towards addressing that problem.

Stephen Hesford: I am slightly mystified by the hon. Gentleman’s approach, because I thought that he said that the new clause would not really work unless in tandem with amendment No. 83, which has just been withdrawn.

Andrew Selous: That is not the case. There is merit in amendment No. 83, and had the hon. Member for Inverness, Nairn, Badenoch and Strathspey wanted to push it to a vote, I would have urged my hon. Friends to support him. If he chooses to reintroduce the amendment on Report, we may well do so.
New clause 15 would deal with another aspect of the problem: the rearrangement of financial affairs in such a way as to ensure the payment—legitimately—of a much smaller amount of child maintenance than should morally, and I should say, legally, be the case. They are separate, they go together, and I shall push the motion to a vote at the appropriate time.

Christopher Chope: I am grateful to the hon. Gentleman for that indication.

Danny Alexander: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 agreed to.

Clause 17

Andrew Selous: I beg to move amendment No. 118, in clause 17, page 7, line 32, at end insert—
‘(aa) make provision that where there is a change in circumstances of the non-resident parent, the Commission shall make a fresh assessment if the gross income position of the non-resident parent increases or decreases by 10 per cent. from the gross income figure fixed by the calculation currently in force.’.

Christopher Chope: With this it will be convenient to discuss amendment No. 124, in clause 17, page 7, line 32, at end insert—
‘(aa) make provision to include that where there is a change in circumstances of the non-resident parent, the Commission shall review maintenance arrangements if the gross income of the non-resident parent has increased by greater than 25 per cent. or decreased by greater than 10 per cent. from the gross income figure fixed by the calculation currently in force;
(ab) make provision for supersession in circumstances in which updated income information is provided to the Commission and the maintenance calculation currently in force has been calculated using historic tax year information held at Her Majesty’s Revenue and Customs.’.

Andrew Selous: I shall be brief, as it is getting late in the day.
Amendment No. 118 would change the provision in the Bill whereby a reassessment takes place only if the income of a non-resident parent either increases or decreases by 25 per cent. I can almost hear the Minister’s response about the agency’s difficulties with readjusting assessments on small amounts of income, but the 25 per cent. figure is much too high. It can be as unfair to the parent with care as it can be to the non-resident parent when income both goes up and goes down. If there is an increase in income of 24 per cent. and children do not benefit from it, that is wrong. If someone has a gross weekly income of £100, it goes down to £76 and the percentage is applied on the £100 figure, that is wrong, too.
The figure is too wide in scope. The Minister will say, “We will get it all through, it will be simpler, it will be administratively easier,” but the scope is just too wide. It is another example of too much rough justice in the Bill. The figure of 10 per cent. would be more reasonable, and variations of 9 per cent. either way could be borne more easily than variations of 24 per cent.

Danny Alexander: I speak in support of amendment No. 124, which is part of this group of amendments. To some extent I share the concerns that the hon. Gentleman has expressed, but amendment No. 124 would introduce asymmetry to the arrangements. It would make provision that
“where there is a change in circumstances of the non-resident parent, the Commission shall review maintenance arrangements if the gross income of the non-resident parent has increased by greater than 25 per cent. or decreased by greater than 10 per cent. from the gross income figure fixed by the calculation currently in force”.
The asymmetry is proposed for two reasons. Although it is important to ensure that children benefit from increases in income, it is also important to provide for non-resident persons whose income falls by, for example, 24 per cent., because if there is no variation, the proportion of their income that is taken up by maintenance could, in some cases, rise to 42 per cent. The amendment is designed to concentrate more of the commission’s limited administrative resources for processing variations and changes in circumstance on those cases in which a fall in income could have a serious effect on the non-resident parent’s circumstances.
The Select Committee’s report includes a helpful table in paragraph 133 on page 37 that shows, using different figures, the proportions of employed non-resident parents who would be eligible for adjustment. A 10 per cent. variation for income falls would result in an increase of 9 to 16 per cent., but a 10 per cent. reduction for income rises would result in the proportion of cases being dealt with rising from 15 to 33 per cent. I accept what the hon. Gentleman said about the importance of ensuring that income increases are passed on, but if the interest of justice and fairness is balanced with the administrative efficiency that CMEC will have to pursue as one of its objectives, our amendment would enable those cases to be addressed in which income falls could lead to serious hardship, although when significant income increases occur they would have to wait until the start of the following year to be processed.
That would be the right balance, and would allow CMEC’s resources to be devoted to cases in which hardship might occur. I agree with many of the points made by the hon. Member for South-West Bedfordshire, but our asymmetric system would make the balance more right and I hope that the Committee will support our amendment.

James Plaskitt: This is an important matter, and I appreciate the points that have been made in support of the two amendments.
Amendment No. 118 would provide for regulations to require a fresh assessment to be made if the gross income of a non-resident parent has increased or decreased by 10 per cent. or more. Amendment No. 124 would provide for maintenance to be reviewed if the gross income has increased by more than 25 per cent. or decreased by more than 10 per cent. from the gross income figure used in the maintenance calculation. It further makes provision for regulations to provide for an immediate change in the maintenance calculations when updated HMRC income is provided to the commission.
Clause 17 provides powers to make regulations on supersessions, which may include the ability to restrict the type of changes in circumstances for which maintenance liabilities can be adjusted. At present, when a relevant change of circumstances takes place the maintenance calculation can be changed to reflect that, and such an adjustment is a supersession. If a client reports repeated changes in income or shared care, the maintenance calculation can change every week. That creates uncertainty for the other parent and also means that agency staff are constantly calculating maintenance rather than focusing on collection and enforcement. I shall illustrate that with some real numbers on which hon. Members should reflect.
Since the introduction of the revised scheme—the 2000 change—5 million changes of circumstances have been notified to the agency, and the current rate is 145,000 a month. That is the scale of changes of circumstances that the agency must deal with at the moment. Taking that into account, I hope that the Committee supports our intention to reduce that volume in the interest of supporting collection and enforcement rather than constant and repeated recalculations.
For the statutory maintenance scheme, the intention is that only significant changes in circumstances—for example, a child starting work or a substantial change in the non-resident parent’s income—will lead to an immediate adjustment in the maintenance calculation. More minor changes will be reflected when an annual case review is carried out, and the maintenance liability will be updated using income data for the most recently available tax year provided by HMRC.
For changes in income, we propose a tolerance level of 25 per cent. If the non-resident parent’s income goes up or down by 25 per cent. or more compared with the historic HMRC figure that was used, the maintenance calculation will be changed so that it is based on the non-resident parent’s current income. That tolerance will not apply when income data are updated at the annual review. If the new income figures result in a change in the amount of maintenance due, then regardless of the amount by which income has changed the calculation will be updated.
The tolerance level must be set where it strikes a balance between allowing significant changes in income to be taken into account, and ensuring that the commission is not inundated with requests for recalculations. We believe that the 25 per cent. level strikes that balance.
We have analysed income changes between 2004-05 and 2005-06 for non-resident parents in the 2003 scheme. That analysis shows that around 40 per cent. of them had a change in their income of 25 per cent. or more. It also shows that just over 60 per cent. had income changes of 10 per cent. or more. Clearly, a tolerance level of 10 per cent. suggests that the commission would be required to make adjustments in a far greater proportion of cases than under our preferred level of 25 per cent. It would affect the commission’s ability to manage its case load effectively and would provide much less certainty for parents. It would, at a stroke, prevent us from moving to a system in which maintenance awards are generally fixed for a year and only updated on an annual review basis.

Danny Alexander: Will the Minister place the information that he has just given, and from which he has quoted excerpts, in full in the Library? His figures differ significantly from those that were given to the Select Committee by the Secretary of State and published in the report on page 37, which would suggest that reducing the threshold from 25 per cent. to 10 per cent. for downward adjustments only would lead to 7 per cent. more cases coming through the system. The totals in the report do not match the ones that he has given. Could he provide the information and set the record straight on how the two sets of figures are consistent with each other? If he could make that clear, I would be grateful.

James Plaskitt: I am happy to do that in order to help members of the Committee.
Amendment No. 124 would provide a tolerance of 10 per cent. for decreases but keep the level for increases at 25 per cent. It would also increase the number of cases that would need to be reviewed. We consider that the system will be simpler for staff and parents to understand if the same figure applies to increases and decreases in income. Under the amendment, non-resident parents could get their payments lowered and based on current income much more readily than a parent with care could ever get them raised. Parents with care would perceive that as unfair.
A much lower tolerance level for decreases in income could also tempt some non-resident parents to manipulate their finances in order to portray a drop in income. We will make provision to prevent the scope for that, but if the tolerance were as low as 10 per cent., non-resident parents might be more tempted to try to do that than with a higher tolerance of 25 per cent. in the knowledge that, if successful, their maintenance would be reduced with immediate effect.
The second part of amendment No. 124 would provide that a maintenance calculation based on historic HMRC income information should be changed immediately if updated income information is provided to the commission. Under the new arrangements, all calculations will be based on HMRC income information unless the non-resident parent’s current income is significantly higher or lower. The calculation will then be updated at the time of the annual review.
The amendment appears to provide that a non-resident parent could submit income details for a more recent period at any time and have their maintenance calculation reviewed. That, too, would clearly inundate the commission with requests for changes.
The system of annual reviews will mean that parents will know how much maintenance they are to receive or pay for the year, and be able to budget accordingly around that figure. Under the amendment, which would allow for maintenance to be reviewed whenever updated information became available, parents would never be able to predict when it might change. If the commission were required to update calculations as soon as new information became available, it could also lead to unmanageable peaks in its work load following the end of the tax year, when most non-resident parents’ new income information for the previous year would become available. It is therefore vital that reviews take place in individual cases when they are due rather than on demand, in order to spread the commission’s work load evenly throughout the year.
Finally, I recognise that although the principle of having the tolerance is accepted, there is a range of views as to what it should be. We do not want to fix it in primary legislation, as it would not be possible to review it in the light of experience. It is therefore much more sensible to provide in secondary legislation.
With those reassurances, I hope that the hon. Gentleman will withdraw the amendment.
Debate adjourned.—[Mr. David.]

Adjourned accordingly at fourteen minutes to Seven o'clock till Thursday 11 October at ten minutes past Nine o'clock.